Purnell to set out reform of housing benefit system

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Plans to cut the £11bn-a-year cost of housing benefit, which covers the rents of four million tenants, will be announced by the Government today. The Work and Pensions Secretary, James Purnell, will announce a review of the one main part of the benefits system to remain largely unscathed while Labour reformed state handouts to the jobless, single parents, sick and disabled.

Payments to 800,000 private-sector tenants and 3.2 million council and housing association tenants are now seen as a disincentive to work, since unemployed claimants can be worse off if they take a job because they no longer receive a rent subsidy from the state. But Labour MPs are worried that the reform plan will create many "losers" among the party's core supporters.

They will press for changes to be phased in slowly – and the shake-up could be put off until after the next general election. Today's White Paper on welfare will say that housing benefit must be fair to taxpayers as well as to people on low incomes.

"You have to have a system which combines protection from homelessness but which is also fair to the taxpayer and fair to people who are in work," Mr Purnell said. The White Paper will also propose that drug addicts on benefits will lose their handouts if they refuse to go on rehabilitation courses and will be paid a £60-a-week "treatment allowance" instead of jobseeker's allowance.

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